Earlier this year iTunes became the number two music retailer in the US, just behind super retailer Wal-Mart. Industry analysts and experts were amazed that Apple’s fledgling online music store had become so big in so little time. But now Apple is claiming that iTunes has reached the number one position in the U. S. market, outselling even Wal-Mart.

This claim is reinforced by a study released this week by NPD, a consumer media analyst group. NPD’s study found that iTunes sold more music during January and February of this year than any other national retailer, and is now the largest seller of music in the U. S., both online and off.

Since its inception in 2003, Apple’s iTunes store has sold over 4 billion music tracks. A great deal of the credit for this extraordinary feat goes to the success of the Apple iPod, which has become a cultural phenomenon not only in the US, but around the world.

Still, Apple’s victory celebration could be short-lived, as there is increasing competition among online music retailers, and MySpace (now owned by NewsCorp) has just announced that it will debut its own online music store, selling downloadable digital music tracks, and also music merchandise and concert tickets.

As the number one social networking web site in the country, Myspace has a huge infrastructure already in place to sell digital music, and industry watchers are taking their new digital music service very seriously.

Amazon.com’s MP3 store also continues to gain ground against the competition online. Launched just a year ago, the Amazon store offers music tracks and a slightly lower price than iTunes, and uses no digital right management technology, so that music downloaded from the side can be copied onto CD, or used in any type of MP3 player.

To keep up with all the competition, iTunes is rumored to be discussing a new plan to offer unlimited music downloads in return for an annual premium fee. Allegedly, Apple is also considering a plan to offer free music downloads in exchange for customer loyalty in buying several Apple products, such as the new iPod and iPhone devices.

For now, Apple is refusing to comment on their future plans, but it is clear that the company will need to expand and grow in order to retain their number one position. With so many different competing music portals online, many analysts believe the future may bring a plethora of smaller niche music sites, dedicated to a particular style of music, or type of media — such as vinyl records.

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